The new tax code limits the deduction of state and local property taxes, as well as income or sales taxes, to a total of $10,000. When the tax reform legislation was put into law at the beginning of the year, some experts felt that it could have a negative impact on the luxury housing market.
“The impact on expensive homes could be detrimental, with a limit on the MID raising taxes for those that itemize.”
Mark Zandi of Moody’s Analytics:
“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”
The National Association of Realtors (NAR) predicted price declines in “high cost, higher tax areas” because of the tax changes. They forecasted a depreciation of 6.2% in New Jersey and 4.8% in Washington D.C. and New York.
What has actually happened?
Here are a few metrics to consider before we write-off the luxury market:
If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! We recently shared data from Trulia’s Market Mismatch Study which showed that in today’s premium home market, buyers are in control.
The inventory of homes for sale in the luxury market far exceeds those searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer which can eventually lead to a price change.
Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call your house their new home.
The sale of your starter or trade-up house will aid in coming up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000.
But not all who are buying luxury properties have a home to sell first.
In a Washington Postarticle, Daryl Judy, an associate broker with Washington Fine Properties, gave some insight into what many millennials are choosing to do:
“Some high-earning millennials save money until they are in their early 30s to buy a place and just skip over that starter-home phase. They’ll stay in an apartment until they can afford to pay for the place they want.”
The best time to sell anything is when demand is high and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs and you are looking to step into a luxury home, now’s the time to list your house for sale and make your dreams come true.
For that reason, prices haven’t skyrocketed as they have in the lower and mid-tier markets. This, coupled with sensational mortgage rates, means that this may be the perfect time to purchase the luxury property you have always desired.
Let’s break it down into the three major reasons to act now:
1. There are more homes from which to choose
According to a recent Wall Street Journalarticle, inventory in the upper end is increasing, while it is decreasing at the lower and mid-tier price ranges. Here is a graph showing the average increase/decrease in inventory for the first four months of this year as compared to last year:
2. Prices are becoming more reasonable
In a separate article, the Wall Street Journal also talked about prices in the luxury market. They explained that downward price adjustments have been more common in the luxury market than in markets with lower prices. They went on to say:
“The growing number of price cuts suggests luxury-home sellers are becoming more realistic about property values as sales have slowed, said several real-estate veterans.”
Not only will you have more to choose from, but you may also be able to get the property at a reduced price.
3. Mortgage rates are at historic lows
In the past, one of the drawbacks to purchasing a luxury property was the larger mortgage rate on “jumbo” loans which are often required on high end properties.
However, HSH.com just revealed that jumbo rates just set new record lows:
“While conforming fixed-rate mortgages eased a little this week, 30-year fixed-rate jumbos declined enough to break into new record low territory (3.66%), besting the previous low set in April by two basis points.”
More choices, better prices and historically low mortgage rates may make this the perfect time for you to own one of those luxury properties you and your family have always fantasized about.
At Fifty Third and Eighth, a condominium development at 301 West 53rd Street, almost everything is for sale. Beyond the apartments themselves, the modern leather sofas, nubby rugs and factory-inspired lamps displayed in model units are all available for purchase. So are the crisp bedsheets, fluffy towels, multicolored bowls and streamlined flatware used to accessorize the spaces.
That offering is the result of a partnership between the HFZ Capital Group, the developer, and the furniture retailer Design Within Reach, which dressed up five model units with product availability in mind. If buyers fall in love with a particular model apartment, they can buy the whole furniture package, ranging from about $39,000 to $60,000, for their new home. If they want to expand the selection, or change a few of the pieces, they can meet with a member of the retailer’s sales team. Or, if they’re smitten only with the $9,400 sofa, they can order just that single piece.
At a time when it seems as if every new development offers increasingly chic model units, and as upscale home staging becomes ever more commonplace, a number of developers in New York are taking showcase apartments to the next logical step – offering complete turnkey homes to buyers through furniture packages, interior design consultations and move-in-ready apartments where all the decorating is already done. Rather than merely showing buyers aspirational model units that demonstrate what their apartments could potentially look like, these developers are presenting comprehensive design visions that can be bought on the spot.
A three-bedroom apartment at One57 is available fully furnished for $20.1 million, and $19.15 million empty.
When sales began at Fifty Third and Eighth, in February 2015, the development team had created preliminary model units designed by Ash NYC, a design and development firm, purely for show. But when people began inquiring about buying those units furnished, the team switched strategies and partnered with Design Within Reach to create new model units in a similar modern style, where such purchases are encouraged.
“The more that people were asking, the more we thought it would be a great idea to offer this to the market,” said Reid Price, an associate broker at Douglas Elliman Real Estate who is the director of sales for the project. “It’s one more way to differentiate our product.”
Jordan Feldman, an associate of HFZ, noted that “a lot of people are first-time buyers here,” who sometimes struggle to envision a completed home. “Even though we already had model units, we thought we could attract a lot more buyers by making them feel like everything’s been done for them already.”
The program has attracted four buyers since it was introduced last November, including some who will use their apartments as pieds-à-terre, said Daniel Gaouette, an account executive at Design Within Reach. “I have a client right now who needs it done quickly because she’s going to be gone for the next three months,” he said. “She just wants some in-stock pieces, so she feels comfortable.”
At 101 Wall, a financial district condominium, the developer, the Claremont Group, is offering something similar. It has created a range of furniture packages with the project’s designer, Amsterdam-based Piet Boon, and Lepere, the New York showroom that sells Mr. Boon’s muscular, minimalist furniture collection. Each design scheme includes a number of suggested furniture layouts and three color palettes from which to choose.
“When buyers move in, they can have the full Piet experience, from flooring to furniture to carpets to drapes to accessories,” said John Lari, a principal of the Claremont Group. “If it helps us get our buyers excited and makes it a less stressful process and move for them, we’re all for it.”
Mr. Boon said, “It’s a total concept, but customized for the customer,” noting that Lepere will coordinate changes and personalization of the packages with his office. “My intention is not to make a standard unit, but something special for each person.”
Dominic Lepere, the owner of Lepere, added: “It’s full service. We’ll meet with buyers throughout the process, help select everything, and then coordinate the shipping logistics and final installation.”
The development’s sales team will begin offering the packages, which range from about $90,000 for a one-bedroom apartment to about $150,000 for a three-bedroom, to buyers in the coming weeks.
Riham El Batanouny and Oussama Jamal, who live in Cairo and Dubai, are in contract to buy a two-bedroom pied-à-terre at 101 Wall for about $2.3 million, and plan to take advantage of the program.
“We went to the sales office, and asked if they had this kind of offering, because it’s so beautiful,” Ms. El Batanouny said. “We live overseas, and it would be very difficult for us to go through the whole process of furnishing. To have it given to you as one package is just amazing.”
At 160 Leroy, a condominium in the West Village, the developer Ian Schrager is offering his own twist on turnkey apartments. “We’re offering design services that allow you to walk into an apartment that has absolutely everything,” he said. “You just have to bring your toothbrush.”
The French designer Christian Liaigre has already designed some furniture pieces exclusively for the building. Working with Mr. Schrager’s design staff, buyers have access to those and other pieces designed by Mr. Liaigre, along with a range of other products and accessories to create a complete home.
“You can buy pieces of furniture with consultation and help from my staff, free of charge, or even hire Christian Liaigre to design your apartment,” Mr. Schrager said. “We do all of it.”
Some developers are taking the concept a step further by offering complete turnkey apartments that are fully decorated before they’re even listed for sale. At Ralph Walker Tribeca at 100 Barclay Street, the Magnum Real Estate Group and the CIM Group are offering a handful of such apartments designed by the firm Grade.
Ben H. Shaoul, the principal of Magnum, said he discovered the demand for turnkey apartments after buyers asked to purchase model units at his previous developments. “Some are international and don’t want to buy their own furniture or hire a designer,” he said. “Some are busy businesspeople who don’t want to deal with it, and some are people who just like the furniture.”
The first of four initial turnkey units at Ralph Walker Tribeca is now listed for $12 million, which Mr. Shaoul said is about $1 million more than it would cost empty. It comes complete with Alvar Aalto bentwood armchairs, a Holly Hunt cocktail table and dining chairs, and a Lindsey Adelman branching dining room chandelier.
“As we sell them, we’ll continue to furnish more units,” he said, “because we feel there’s demand for this in the market.”
Ms. Post not only selected a whole home’s worth of furniture, rugs and light fixtures, but also changed the interior architecture. She dropped the living room ceiling slightly to add recessed lighting and create drapery pockets, enclosed structural columns, and built out a living room wall to add light coves and showcase art. She also covered every wall with Venetian plaster or wallcovering, and added custom built-in furniture.
“I’ve been doing this more and more for international buyers,” said Ms. Post, explaining that she designs luxury homes from start to finish for clients who just want them completed. “These people have three or four homes, and they do not want to come to New York and oversee design and construction.”
The apartment, which would have been $19.15 million empty, is now listed for $20.1 million. If someone buys it, he or she will get everything but the art (which is on consignment from galleries), right down to the soap, candles and books.
It wouldn’t be the first furnished apartment to sell in the building, which is about 80 percent sold. A previous apartment that had been designed by Jamie Drake as a model unit sold with all its furniture last September for $28.5 million, $1.5 million above its price empty, when a buyer just had to have the complete package.
“We were thrilled to sell that residence, and realized there really is a market for people who just want to come in, take it, and move in,” said Graham Spearman, a senior sales executive at Extell.
The company plans to build more turnkey units at One57, Mr. Spearman said, and at other properties in its portfolio. “For us, there’s no risk involved,” he added, “because we know it’s going to sell.”